Victoria’s unemployment rate improved to 4.3 per cent in October, driven by a booming construction industry that appears immune, so far, to the prevailing economic headwinds and ongoing labour shortage.
According to recent numbers released by Statistics Canada, Victoria’s labour force increased by 4.8 per cent to 225,600 between October of this year and last, while the number of people employed here increased 5.2 per cent to 216,000.
The biggest increase year over year was in the construction industry, which saw its total employment increase to 19,600 in October from 12,700 at the same time last year.
The wholesale and retail trade sector also saw a significant improvement with 3,700 more positions in October compared with last year, while the transport and warehousing sector saw an increase of 2,600 jobs.
The business, building and support services sector, which covers contracted administration and human resources services as well as cleaning services, saw the biggest decrease year-over-year, shedding 5,100 positions, while educational services dropped 1,900 jobs over the last 12 months.
“It’s not surprising the numbers in construction are high,” said Chris Atchison, president of the B.C. Construction Association, who added the numbers have increased over the last three years. “There’s been steady growth in construction both in terms of activity and attraction to the workforce.”
He said the construction labour force in the province now numbers about 236,000, ranking it the number-one employer in the goods-producing sector.
Atchison said the growth comes down to demand. “Home building, industrial and institutional builds have been part of what’s carried our economy throughout the pandemic.”
With rising interest rates and high supply and labour costs, however, the private sector has started to pull back on spending, though public investment in institutional projects remains fairly steady and the labour shortage is still the industry’s biggest problem.
Atchison said while they are still riding a wave of investments that have already been made in big projects, there are challenging times ahead.
He also noted that while the Statistics Canada numbers show an overall increase, the number of skilled trades continues to drop.
Rory Kulmala, chief executive of the Vancouver Island Construction Association, said the province will be short 27,000 to 30,000 skilled trades workers by 2027, which on the Island could translate into a shortage of 10,000 to 15,000 in the next five years.
“The demand for [skilled trades] is still there notwithstanding the reports that we’re heading for a recession,” he said.
Kulmala agrees with Atchison that construction spending could tighten up as a result of increased interest rates, but says there is still heavy demand for new housing.
Casey Edge, executive director of the Victoria Residential Builders Association, said his membership continues to struggle with a tight labour market and supply issues.
He said mortgage costs and the stress test for new home buyers will get tougher with higher interest rates, which will make new development more challenging.
“But builders are a very resilient group — it is an industry with ebb and flow and to be successful in this business, you really have to know how to adapt to varying economic conditions,” he said.
Meanwhile, optimism has returned to Victoria’s commercial real estate market, according to a market outlook from CBRE.
The outlook from the commercial real estate company, which looked at industrial, office and retail real estate as well as multi-family residential development, suggests there is plenty of demand in the region.
The outlook noted the industrial sector is limited only by available land, though there is land development underway that should result in an additional 220,000 square feet of space established by the end of this year. The lack of land is expected to drive up the sale price of industrial land to $400 per square foot.
“The market is effectively out of industrial-zoned parcels,” the report said.
A third-quarter market “snapshot” from Colliers pegged Victoria’s office vacancy rate at 5.9 per cent, second lowest in Canada, and an average lease rate at $24.01 per square foot, third highest in the country.
Greater Victoria has Canada’s tightest industrial sector, with a 0.1 per cent vacancy rate, according to Colliers, which noted owner-occupiers may be wise to make a move during what is currently a mild dip in the market. One industrial project was put on hold in Q3 2022 due to rising construction costs, despite leasing rates averaging more than. $17 per square foot, second highest in the country.
“With an industrial vacancy rate still near zero, rents have increased and will likely continue to climb this year. Users will likely want to still get their foot in the door sooner rather than later, because nobody knows when or even if a price reduction will come,” Colliers cautioned.
